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The Clock Is Ticking on the China Trade Scam

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Wall Street and China can’t seem to grasp the fact that the U.S.-China trade war is real and the clock is ticking on massive new tariffs. The wishful thinking since last January is that the trade war is mostly for show, both sides are posturing and a “deal” will soon be worked out that allows Trump to claim victory without really changing very much from China’s perspective.

We’ve said all along that this misreads the situation. The U.S. is demanding real, verifiable changes regarding China’s theft of intellectual property, limits on U.S. investment in China and technology transfers from U.S. companies that do manage to get in the door. Nothing less is acceptable to Trump.

After a year of tit-for-tat tariffs and fruitless negotiations, the two sides finally agreed on substantive negotiations on the hard issues. The agreement was reached at the now-famous dinner in Buenos Aires on Dec. 1 with President Trump and Chinese President Xi Jinping and their staffs in attendance. As explained in this article, the U.S. has set March 1, 2019, as a deadline for a satisfactory conclusion to these negotiations.

So far, China has offered mostly meaningless concessions, including putting some tariffs back where they were before the trade war erupted (no net gain for the U.S.) and modifying its “Made in China 2025” initiative to dominate the technologies of the future (a purely cosmetic change). Meanwhile, the U.S. has kept up the pressure by the Canadian arrest of the CFO of Chinese electronics giant Huawei and making it clear that the March 1 deadline is hard and fast.

We still have over 60 days left before the deadline. Don’t expect much progress between now and New Year’s Day. If enough progress is made, an extension might be agreed upon. But for now, China is just going through the motions and Wall Street is sleepwalking off a cliff.

The world may discover on March 1 that tariffs are going up and the trade war is just getting started.

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